why are budgets useful in the planning process? course hero

Budgeting is important because it allows you to create a spending plan to control your money better, ensuring you have money for things you need and want. A budgeting system helps you achieve your financial goals, save money, get out of debt, prepare for emergencies, relieve financial stress, and keep you organized.

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The Budget Process

If you're going to allocate money, of course, you need to have funds to spend. The first consideration in a local government's budget is to total up all the available revenues which usually include non-restricted funds, restricted funds, and other funding sources. The next step in the budget process is the preparation.

Strategic Planning and the Budget

Whenever you set off on a journey, it's nice to have a plan for where you're going. Whether you use GPS or some other kind of map, you won't get anywhere unless you know where you are, where you want to be, how you're going to get there, and how long it will take for you to reach your destination.

Why are Budgets Useful in Planning Process?

The following points will tell why budgets are useful in the planning process:

Why are budgets important in planning?

A budget is basically a financial plan that helps to estimate the revenue and expenses for an upcoming period. One can prepare a budget for a month, quarter, year, or multi-year. Both at the personal and company level, ...

Why do we need budgets?

Since budgets help to monitor, evaluate and compare the performance of all internal entities, it gives management all the information it needs to make better decisions.

Why is a budget considered a financial report card?

Since budgets include every financial detail of a company, it works as its Financial Report Card. This means that stakeholders can get an idea of a company’s financial health by going through the budget.

Why do lenders need to see your budget?

Usually, lenders and investors want to see all details of your finances. So, if you keep budgets , it becomes easy for lenders to assess your financial health. Moreover, if you are a new business, a budget can help you to present your financial plans.

What is a business without a budget?

A business without a budget is like flying blind. This means the business will continue to operate without knowing the revenue and expenses to plan for. Usually, such businesses don’t stay active for long. In a nutshell, we can say that a budget helps to assess the available capital, as well as estimate the revenue and expenses.

Why do businesses need to prepare budgets?

Preparing a budget assures lenders that the borrower has the ability to develop a business plan and execute it as well. Usually, lenders and investors want to see all details of your finances.